The Business Magazine March 2024

A Budget for growth - Hazlewoods reflect on the positives for business

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The Chancellor’s Spring Budget centred around economic growth following the OBR forecast that the UK is no longer expected to enter a technical recession this year. Further, positive forecasts for growth were given for the next four years after this year, reaching a peak of 2.5% in 2025.

To address issues of productivity in the economy, particularly low business investment and higher economic activity than other comparable countries, and help to drive growth, the Chancellor set out four pillars of enterprise, employment, education, and everywhere.

The main focus of this article is the Chancellor’s pillar of ‘enterprise’ which focussed on lowering business taxes and supporting growth industries.

Firstly, the Chancellor announced that although his aim was to lower business taxes, he would still be proceeding with the increase in corporation tax to 25%, from 1 April 2023. He did, however, announce some measures to encourage investment. One of those measures was the introduction of ‘full expensing’ of qualifying plant and machinery expenditure from 1 April 2023 for three years (following the end of the 130% super deduction), with the intention of making it permanent thereafter.

Full expensing is only available for companies and on qualifying new and unused plant and machinery but for most companies, this effectively scraps the £1 million limit for annual investment allowance. Given that 99% of businesses fall within this limit already, it is hard to see how the policy costings of £9 billion per year, on average, have been derived.

In addition, companies investing in special rate assets (including long life assets but excluding leases, second-hand assets and cars) will also benefit from a 50% first-year allowance during the three-year period to 31 March 2026.

A new payable credit for ‘R&D intensive’ loss making SME companies was announced allowing the surrender of losses for tax credits at a rate of 14.5%. This will mean that eligible companies will receive approximately £27 from HMRC for every £100 of qualifying investment. To qualify as ‘R&D intensive’ the company’s R&D expenditure must equate to at least 40% of total expenditure. Other loss-making SME’s will be entitled to a 10% credit, as announced in the Autumn Statement, which equates to a cash credit of £18.60 for every £100 of qualifying expenditure.

Other changes to the R&D tax rates and regime from April 2023, as detailed in our article here, are still set to go ahead with the exception of some slight timing changes announced in the Spring Budget. The first was that the provision of additional information to be submitted, alongside an R&D claim, will now be required for all claims made on or after 1 August 2023, rather than for accounting periods beginning on or after 1 April 2023 as originally announced. Secondly, the proposals to focus relief on UK only R&D activities, rather than overseas, have been pushed back a year.

Further announcements to encourage innovation included a reform of the regulations around medicines and medical technologies; allowing a quicker route to sign off where already approved by trusted regulators elsewhere including the United States, Europe and Japan. A £10 million fund was also pledged to help simplify the regulatory approval process.

Hunt also announced a £1 million prize, for each of the next ten years, to be awarded to the person or team with the most ground-breaking AI research dubbed the ‘Manchester Prize’.

Finally some measures were announced to help boost the workforce including apprenticeships for the over 50’s, to be known as ‘returnerships’ along with some anticipated changes to pensions. A sizeable increase to the current pensions lifetime allowance of £1.073 million was expected but the Chancellor went one step further by abolishing it altogether. Further, the annual allowance was also increased from £40,000 to £60,000 but tapered once income is over £260,000 to a new minimum figure of £10,000 (previously £4,000).

All in all, no big giveaways for businesses but some smaller measures to help with the target of growth and potentially bigger cuts to come over the next 12 months as the economy becomes more stable and in the wake of a general election.

If you would like any assistance or advice on R&D tax rates, please get in touch with Jemma Vaughan on 01242 237661 or email [email protected]